COMMENTARY:
SOY
BEANS – The bean market continued lower after yesterdays USDA report. It is my thought that this is the start of a protracted move that could last awhile. Essentially the carry domestically moved from tight to ample in one day. This was something I was looking for. The beans will be influenced now not only by the domestic carry, but the global ample supply as well. It will be important to see how the weather plays out this season in the southern hemisphere. The predictions of La Nina are watched closely, however lets see the reality. Look at rallies on weather scares as hedging opportunities. It is important to note the current prices are historically high.
MEAL – The meal closed lower. The current level is interesting and offers some value in my opinion. There are two dynamics to watch at present. The first is the energy issue in China. A fair amount of crushing capacity is down due to rolling black outs. This could create a situation where the Chinese will need to import meal. They have been net exporters of late due to the crushing capacity. The second thought is the slowdown in our domestic hog market. Actual contraction will be a bit of a demand issue for feed. This is offered as a current reason for the continued weakness. I have no bull flag for meal, I feel however on a relative basis at these levels meal may gain share in the crush.
BEAN OIL – The bean oil market traded both sides today. The oil is interesting. It is my thought the highs are in. This is true for flat price and the oil share. The global market is slowly but surely getting more supplied. It is my thought that by year end the stocks will be back to a more normal level in most excluding the Canadian Canola market. This will relieve any perceived tightness and give bean oil reason to continue its decline. My suggestion is patience and sell rallies. Users should remain patient as the market comes to you over time.
CORN – The corn is showing strength. The USDA added to the carry. However, there are private analysts that think the yield is over stated. The corn remains well supported at present as well with the wheat market tight due to the stocks dwindling. This is a key part to the market here. The corn relative to beans has some work to do and I suspect this will keep this spread moving in corns favor.
LIVESTOCK
HOGS – The hog market today was a bit more subdued. The hogs and pig report was important. The long term implications should keep a bid under prices. Given the reduction of 3 million hogs, the significant contraction in the breeding herd, which could indicate further contraction. The market should remain in a friendly stance for some time to come. The market will obviously look at future demand numbers, the supply side is friendly.
CATTLE – The cattle has been under pressure. The technical picture is bearish. The fundamental picture looks bearish at present as well. The fact that the higher weight categories show more cattle on feed could spell a problem in the near term. In addition, marketings are off a bit as well. In my opinion this could weigh on the market in the near term.
NEWS
US consumer confidence fell for the third consecutive month
Chinas PMI shrinks to 49.6 in sept contracting
Crude approaches the 8 year high, the market almost doubled from when Biden took office
Biden indicates he will maintain the tariffs on China.
Trade Suggestion(s)
N/A
Risk/Reward
Futures – N/A
Options – N/A
BE WELL,
John J. Walsh
President, Walsh Trading, Inc.
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